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The One-Chart Summary Of All That Is Wrong With The US Financial System: JPM Deposits Over Loans

Tyler Durden's picture


The chart below may be the best one-chart summary of all that is wrong with the US financial system. It is a very simple chart - it shows total JPMorgan deposits, loans and the excess difference of deposits over loans.

Why is it a good summary? Because as the blue bar shows, total loans issued by the biggest US bank were $723 billion in Q1 2013: about $30 billion less than in the quarter Lehman blew up. Four years later, and the US commerical bank lending apparatus is still in a state of depression. Or so it would appear on the books.

But why doesn't JPM lend out more: after all that is the main pathway to stimulate the economy as all pundits will tell us. Simple: it doesn't need to. As the red bars show, total consumer deposits held by the bank just rose once more, this time to a record $1202.5 billion, up $9 billion in the quarter, pushing the deposit-over-loan difference to a new record $480 billion. This is happening exclusively due to the Fed, which when banks do not "create" money from loans (as they obviously don't), has to step in with QE and create money on its own.

It also means that JPM has to allocate this excess capital somehow and until a year ago, was simply funding its prop trading desk with this deposit cash as "dry powder" to manipulate and corner various derivative markets courtesy of the London Whale traders. Another result of course is that risk assets are bid up to record highs even as the actual flow through of the Fed's "wealth effect" is halted precisely due to the complete collapse in new loan creation - the primary "transmission mechanism" of economic growth.

In other words, by keeping the pedal to the metal on QE, the Fed is giving the banks all the benefits of money creation (soaring deposits), without any of the risks (loan creation in a record low Net Interest Margin environemnt). Any if you are JPM you will be perfectly happy with this arrangement and not seek to lend out any money, as the case has been for the past four years. Which means consumers who wish to take out loans to fund ventures and other growth strategies are fresh out of luck, because the banks that ordinarily supply them with this risk capital have simply shut down the process entirely.

And that is precisely the jist of all that is broken in the US financial system, and why the Fed is in fact making things worse, not better, and is progressively destroying the wealth of the middle class, stunting any growth opportunities the US may have, and all the residual wealth is pumped into the hands of those benefiting solely from rising asset prices.


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Fri, 04/12/2013 - 08:31 | 3440101 Jacque Itch
Jacque Itch's picture

I just took my morning Dimon and wiped my Bernanke

Fri, 04/12/2013 - 08:55 | 3440203 eclectic syncretist
eclectic syncretist's picture

Sounds like Bernanke is planting twolips under the table for Crimin' Dimon and LLoyd Blankheart

Fri, 04/12/2013 - 09:43 | 3440425 icanhasbailout
icanhasbailout's picture

who needs a functioning economy when you can make your fortune off free money?

Fri, 04/12/2013 - 10:29 | 3440657 walküre
walküre's picture

Brilliant, isn't it? And it works so well for the idiots at the top because the sheep aren't thinking outside the box and still accepting the funny money they print at face value.

Fri, 04/12/2013 - 10:49 | 3440767 Badabing
Badabing's picture

wow if the red was loaned out we would see double digit inflation

Fri, 04/12/2013 - 11:09 | 3440957 eatthebanksters
eatthebanksters's picture

So Main Street is doublefucked - once by Helicopter Ben and then again by banks....hmmm...what to do?

Fri, 04/12/2013 - 11:12 | 3440970 Seer
Seer's picture

".hmmm...what to do?"

Obviously it's to do MOAR! </sarc>

Fri, 04/12/2013 - 16:30 | 3442658 sasebo
sasebo's picture

Snafu --------

Fri, 04/12/2013 - 16:29 | 3442660 sasebo
sasebo's picture

When in doubt, whip it out.

You & i and a lot of others are working on this  --- so hopefully before long  ---------- we can't be that stupid.

Fri, 04/12/2013 - 11:01 | 3440873 Ludwig Van
Ludwig Van's picture

It is easy, when lost or distracted by the minutia, to forget that the object of these machinations is to kill the U.S. Dollar.

The boys are on record: To kill the USD.

With that understanding, it is clear they're doing an excellent job of it.

Prepare accordingly.


Fri, 04/12/2013 - 11:22 | 3441038 Seer
Seer's picture

In essence I completely agree with you on this.  However...

I see it more as a "recall" of the USD.  I also see it as just plain taking over a massively illusionary economy, an economy that has been so distorted for so long that there's really no way to clean it out other than slowly remove all the players except the Big Boys who cooperate (with the Big Unwinding).

That anyone could not see the impending reality of a MAJOR restructuring in all that is civilization is beyond me.  The growth meme has been fun, but no longer can we organize ourselves on it.  The Bible mentions the Apocalypse- I'm no bible thumper, but I believe that the concept applies, and that's that there will be a big event, a big unveiling occurring- we'll all be stood up to the mirror and told to tell ourselves that no longer will growth be possible (a recall on "go forth and multiply"- the multiplier is popping up as a zero).

Fri, 04/12/2013 - 09:54 | 3440454 DaveyJones
DaveyJones's picture

excellent and simple truth Tyler


Fri, 04/12/2013 - 11:17 | 3441012 Strut
Strut's picture

Let’s see that chart with the % of loans that are government backed mortgages. JPM is almost the sole buyer of FHA, HUD, and USDA gov backed loans. I bet you'd see that the % of non govt secured loans are plummeting. They aren't taking on any risk except for their trading desk.

Fri, 04/12/2013 - 10:25 | 3440638 GoldForCash
GoldForCash's picture

Do you ever wonder just what the hell anyone or corp could do with 480 billion dollars? buy a country? Is it just a game to the assholes? I'm serious , not just ranting .

Fri, 04/12/2013 - 11:29 | 3441094 Seer
Seer's picture

Fine, and Then what?

Seems history is pretty clear when there's too great of a wealth divide.

It's been a Big Game for a Long time: perpetual growth on a finite planet.  Whether they knew that there was actually an end or not I do not know; BUT, I DO know that their positions of power will fade fast once the meltdown starts in earnest.

Fri, 04/12/2013 - 10:29 | 3440666 Saint Pitbull
Saint Pitbull's picture

The BIG problem now is that all of the QE's are waiting to explode into inflation if and when the banks do start lending.  This will become a bigger problem than the bank's not lending.  Solution (in the government's mind) - the government needs to seize the money that it cranked out in the QE's.  There is NO good exit from this economic treason.

Fri, 04/12/2013 - 10:49 | 3440774 Next to Arch Stanton
Next to Arch Stanton's picture

"if and when the banks start lending.."

Can inflation take off without the banks resuming "normal" levels of lending?  If they're not lending now, how does the macro environment possibly improve with all the systemic problems facing us to the point where banks want to resume "normal" lending?  

I've seen this narrative in many posts, articles, etc.  I suppose that lending is the only means by which the excess reserves can circulate in the broader economy (as opposed to stock market?).  

Fri, 04/12/2013 - 11:42 | 3441162 Seer
Seer's picture

"If they're not lending now, how does the macro environment possibly improve with all the systemic problems facing us to the point where banks want to resume "normal" lending?"

In essence govts are injecting banks with money as a pay-off to keep interest rates low.  The dance that they're dancing is alienating everyone else.

It's like the airplane pilot of an airplane that's lost all power who pulls the jet from a nose dive, and while the corrected descent keeps the plane from trying to bisect the ground, is now staring straight into the side of a mountain.  "Inflation," "deflation," when the end result is the same does it really matter?

Fri, 04/12/2013 - 11:56 | 3441239 CheapBastard
CheapBastard's picture

Wait until JPM decides to Corzine those deposits....moar pain cometh.

Fri, 04/12/2013 - 14:50 | 3442158 Ned Zeppelin
Ned Zeppelin's picture

Any visible chunks of half- digested Krugman in that fat Dimon?

Fri, 04/12/2013 - 08:31 | 3440105 MiltonFriedmans...
MiltonFriedmansNightmare's picture

Tyler, we are all waiting with bated breath for an update on Lloyd's and Jamie's meeting with our compromiser-in-chief.  What's the good word?

Fri, 04/12/2013 - 10:26 | 3440636 SubjectivObject
SubjectivObject's picture

Hammer the commodity complex.

Free lunch at 11, go home at 1.  Laugh all the way.

Fri, 04/12/2013 - 08:33 | 3440112 firstdivision
firstdivision's picture

That means they have more money to make bets with.  Seems reasonable to me.

Fri, 04/12/2013 - 08:37 | 3440126 MiltonFriedmans...
MiltonFriedmansNightmare's picture

Perhaps, after having read the article, the answer to the question is; QE to infinity and beyond, as we have expected all along? I don't believe the compromiser-in-chief would have a problem with that.

Fri, 04/12/2013 - 08:34 | 3440115 Bearwagon
Bearwagon's picture

Thar she blows!

Fri, 04/12/2013 - 08:37 | 3440118 yrbmegr
yrbmegr's picture

If people have all this money to deposit in the bank, why do they need loans?

Fri, 04/12/2013 - 08:42 | 3440148 LawsofPhysics
LawsofPhysics's picture

It's not depositors money, it "ZIRP" money.  Who do you think does the actual dirty work for the Fed?  JPM isn't just another primary dealer, it's the primary dealer.

Fri, 04/12/2013 - 08:47 | 3440171 yrbmegr
yrbmegr's picture

The article says it's "consumer deposits". I didn't think that included proceeds of asset sales. I think you're actually right that it's not just "consumer deposits".

Fri, 04/12/2013 - 08:57 | 3440196 LawsofPhysics
LawsofPhysics's picture

You are not very familiar with how "mark to fantasy" accounting or modern banking works are you?  Define "customer".  Go ahead, really, go see who is the "customer"  I think you will be surprised as to the customer really is.

Fri, 04/12/2013 - 09:00 | 3440227 eclectic syncretist
eclectic syncretist's picture

Please allow me to take a shot at interpreting what Tyler is telling you here, in layman's terms.

The Fed is printing (counterfeiting) money and giving it to the banks, so naturally, the banks have lots of profits.

It's really that simple.  And that wrong.  Morally, ethically, politically, culturally, legally, ect.  They should all be in jail.

Fri, 04/12/2013 - 09:04 | 3440244 LawsofPhysics
LawsofPhysics's picture

Glad to see someone understands what I am saying.  This money and these "customers" are proxie for the Fed, nothing more.  JPM has not been a real bank for over 50 years.

Fri, 04/12/2013 - 09:11 | 3440274 jayman21
jayman21's picture

I would up you 50 years and say at least 100 years.

Fri, 04/12/2013 - 09:13 | 3440292 eclectic syncretist
eclectic syncretist's picture

It's become a maelstrom circle-jerk.  The Fed gives it to the banks, who loan it to the government/taxpayers, who authorize the Fed to give more to the banks, who loan it to the government/taxpayers, ect.

The end result is the Fed is providing lots of imaginary value and we the taxpayers pay true value for it.  They should all be in jail.

Fri, 04/12/2013 - 10:46 | 3440701 centerline
centerline's picture

Bingo.  It is a wealth transfer mechanism.  Those who are closest to the creation of money benefit most.  Over time the disparity becomes obvious.

The trick here is just like in the movie "Trading Places."  It is not necessary to conduct outright theft per se.  It is about riskless trades/investments.  Which is still theft... but not in the eyes of the courts of course.

This is what asshat economists ignore.

Fri, 04/12/2013 - 10:36 | 3440706 walküre
walküre's picture

Same as the ECB does now. All sovereigns are basically living on their own fumes. It's like breathing farts and nothing else.

Fri, 04/12/2013 - 10:56 | 3440807 Kirk2NCC1701
Kirk2NCC1701's picture

It only LOOKS like a circle jerk. Actually, it's a Grand Plan to use tertiary (paper) wealth as a mechanism to transfer Real (primary) wealth to the Elite.

You will soon meet your (new & old) feudal Over-Lords. Who run this country. And their kind that is taking over other countries. By the time ppl realize this, it'll be too late.

Fri, 04/12/2013 - 11:50 | 3441197 Seer
Seer's picture

Um... they took over countries a LONG time ago.  What we're all seeing is that they are LOSING this grip, and that their thrashings make it sound as though they are trying to "save" everyone else.

STABILITY- that's what works best for TPTB.  When you plot out this course its trajectory leads to nothing of the sort (short-term it might look so, and perhaps to them even [I have no way of knowing what's in Their heads, though I tend to believe that they realize that they're at the helm of a sinking ship that's sailing in shark-infested waters]).

Fri, 04/12/2013 - 10:08 | 3440519 DaveyJones
DaveyJones's picture

Can somebody swat the down vote mosquito. Making me itch

Fri, 04/12/2013 - 10:30 | 3440661 SubjectivObject
SubjectivObject's picture

I love the smell of rejection in the morning. 

Smells like ..... victory.

Fri, 04/12/2013 - 09:36 | 3440377 scatterbrains
scatterbrains's picture

maybe they need all that extra money against their precious metals short book.  Could you imagine if real physical really did break from paper and the only way JPM could survive is for the fed to keep printing money to cover JPM's short bet which then drives gold higher requiring more printed money, pushing gold even higher, more and more, higher and higher in a feed back loop that can't be stopped ?

Fri, 04/12/2013 - 10:23 | 3440500 DaveyJones
DaveyJones's picture

this criminal law boy can't see it any other way. But (as William Black and others say) there's an earlier chapter. The Fed is doing this to cover, in part, prior criminal activity at a scale probably never seen before. Well, except for this "remedy" ...but that was after

you know, it makes me think this place just might be corrupt 


Fri, 04/12/2013 - 12:02 | 3441282 Seer
Seer's picture

The System was flawed from the get-go.  Perpetual growth on a finite planet was always going to turn out badly.  All these folks are operators of this System.

Is there a Captain Kirk out there?  In one episode of Star Trek there was a flashback to him in training school engaged in a test that was rigged for failure.  Kirk "won" by reaching outside the parameters of the rigged test- in essence "cheating."  He claimed that the aim was to succeed, and in this case, since it was all (unfairly) stacked against him he was well within reason to do what he did (he was, after all, responsible for his crew).

One could say that the likes of Dimon have operated as Kirk, but I'd claim that he (Dimon and the others) have acted just as the rigged system intended.

Buckminster Fuller said that you cannot change the system, and you should, instead, look to create something else and make the current/old obsolete.

Fri, 04/12/2013 - 10:01 | 3440502 KickIce
KickIce's picture

Deposit = Bonus + Commodity Purchases + Bond Purchases + Stock Purchase

Everything one needs to keep the ponzi illusion alive and kicking.

Where's Krugman's sorry ass claiming they need more.

Fri, 04/12/2013 - 08:54 | 3440186 dontgoforit
dontgoforit's picture

The banks' make money on the interest from the loans they make.  It's not in their interest to just 'hold' the funds.

Fri, 04/12/2013 - 09:01 | 3440233 fonzannoon
fonzannoon's picture

ask the london whale if he was "holding" the funds.

Fri, 04/12/2013 - 10:02 | 3440499 Cacete de Ouro
Cacete de Ouro's picture

Matt Zames, JP Morgan CIO:

“I wake up every morning -- every morning -- excited to actually make this place a better place. I am truly humbled and honored to have been given the opportunity.”

Fri, 04/12/2013 - 10:41 | 3440728 Againstthelie
Againstthelie's picture

Zames? A chosen one? Understandably when doing the work of god...


Fri, 04/12/2013 - 09:31 | 3440235 LawsofPhysics
LawsofPhysics's picture

If in fact banks were really banks and had to manage that risk or actually go bankrupt, what you say would be true.  I agree, if it were you or I, what you would say would be true.  However, if those "customers" are really proxie for another entity that stands to benefit from not making loans or not paying the saver interest, well then, the bank really isn't a bank now is it?  JPM hasn't been a bank for over 50 years.

Fri, 04/12/2013 - 10:14 | 3440544 DaveyJones
DaveyJones's picture

if in fact our leaders were really leaders...

if in fact our prosecutors were really prosecutors

if in fact our protection agencies were really - well you get the point

(so just as my screen refreshed it already had the negative vote. Good Morning Ben)

Fri, 04/12/2013 - 09:08 | 3440257 eclectic syncretist
eclectic syncretist's picture

No, the banks are making money now because every month the Fed gives them $85 billion brand new imagineered dollars.

As shitty as the yield on the ten-year bond is, you figure 2% of $85B/month is $1.7B/month or over $20B/year, if they just plow it all into government debt.  The banks might not actually make that much for a variety of reasons, but that is a very fair cocktail napkin type estimate of the value being provided to them.  Now when you factor in fraction reserve leveraging, which amps everything up by can begin to see there is little reason to lend to anyone other than the Gov. = no loans for main street.

Fri, 04/12/2013 - 09:41 | 3440411 MiltonFriedmans...
MiltonFriedmansNightmare's picture

I woud imagine the mix goes something like this: US treasuries, ES, highly leveraged derivative plays, and then perhaps 10th or 15th on the list, consumer and business related loans.

Fri, 04/12/2013 - 09:11 | 3440283 jayman21
jayman21's picture

You said "make money".  He he he ha in a beavis and butthead way

Fri, 04/12/2013 - 10:44 | 3440753 bagehot99
bagehot99's picture

They're trading with it, not holding it.

And they don't make money lending it at 4% to people who stand a good chance of defaulting.


Fri, 04/12/2013 - 09:36 | 3440383 yogibear
yogibear's picture

Guess who's buying equities with that money?

Fri, 04/12/2013 - 08:37 | 3440128 Spontaneous Violence
Spontaneous Violence's picture

I'm a little confused. If under a zirp  environment why is there excess deposits? I from Oz so don't exactly understand the idiosyncratic nature of the US system.  

Fri, 04/12/2013 - 09:29 | 3440343 Acet
Acet's picture

That specific bank is a Universal Bank, meaning it has an Investment Bank and a Retail Bank under the same roof.

The thing is, what you see in that graphic is just the Retail Bank side of the operations, i.e. the traditional take deposits in, lend money out, which in an Universal bank is less than half the story.

In reality, all that excess of deposit money is made available to the Investment Banking side of the operation and ends up as bets by the banks prop desks in various markets, for example it's used to buy stocks in the stockmarket, as collateral in various OTC trades and even as margin in derivatives trades.

In the current environment which not only has ZIRP but also has massive direct and indirect pumping of money by the FED into several markets (i.e. they're pumping up the markets, hence recent S&P record highs) it makes all sense for the likes of JPM to take depositors' money which costs maybe 0.5% per year in interest and risk it in the stockmarket which has been making far more that that and far more that loans would make.

Also, don't forget that JPM gets advanced information of market moving actions by the FED (which the recent POMO leak once again brought to light) so they're much more likelly to be able to exit markets earlier than others if there's trouble AND they are pretty certain they will be bailed out by the US Government if they ever seriously fuck-up.

Last but not least, at a human, personal level, bonuses for mid- and high-level management are far higher for Investment banking AND if the company crashes no mater what those people get to keep their earnings from previous profits and will never be brought to court (as the events of the last 5 years have proven). JPM's management has an incentive to go all in on high-stakes high-risk Investment Banking gambling since all they risk is other people's money.

Fri, 04/12/2013 - 08:38 | 3440132 LawsofPhysics
LawsofPhysics's picture

How about paying the savers some fucking interest?!?!?!?!?!?!  Stupid motherfuckers.  Making real loans also requires real fucking work (it's called due diligence).  Banks don't have to work anymore or live with their decesions (risk).  Go ahead, bail these motherfuckers out with taxpayer monies just one more time, go ahead, I double dog dare you...

Fri, 04/12/2013 - 08:47 | 3440172 Bearwagon
Bearwagon's picture

As if you didn't know exactly, what would happen, if interest rates ever rise again.  ;-)

Fri, 04/12/2013 - 08:55 | 3440202 Too Big 2
Too Big 2's picture

What are you going to do if and when the next bailout occurs? 

FYI, the next "bailout" will be partly funded by "uninsured depositors" of the bank ala Cyprus.

Fri, 04/12/2013 - 09:03 | 3440240 Bearwagon
Bearwagon's picture

To be honest with you: I'd lose my mind.

Fri, 04/12/2013 - 09:07 | 3440255 fonzannoon
fonzannoon's picture

why would a bank ever fail under these conditions...which are here to stay?

Fri, 04/12/2013 - 09:14 | 3440290 jayman21
jayman21's picture

The Repo market has a way of sorting it out.

Fri, 04/12/2013 - 09:12 | 3440288 SmallerGovNow2
SmallerGovNow2's picture

bailouts never stopped.  they are going on every month to the tune of $45 billion as the fed purchases their worthless junk MBS's every month.

Fri, 04/12/2013 - 10:13 | 3440566 Winston Churchill
Winston Churchill's picture

What you mean when.

What the fuck di you think buying those toxic MBS for face value is.

Its never stopped.

Fri, 04/12/2013 - 09:11 | 3440282 Spontaneous Violence
Spontaneous Violence's picture

Precisely my question? If there is nil or close to zero interest interest why is there excess deposits? My understanding is that capital is chasing yield which does not reflect the current situation so I'm obviously missing something?

Fri, 04/12/2013 - 09:19 | 3440314 Agstacker
Agstacker's picture

Only keep enough $ in the bank to pay bills, ect.  The rest buy gold and silver. 

Fri, 04/12/2013 - 10:22 | 3440614 DaveyJones
DaveyJones's picture

If I were a betting man, I'd say there won't be another big (formal) bailout. There will be plenty of other "big events," (none of them good) just not a bailout 

Fri, 04/12/2013 - 09:11 | 3440134 Mercury
Mercury's picture

Let's see:

dirt cheap cost of capital (and a lot of it) + very few loans + no terribly onerous disincentives or impediments to imprudent investments (let's not kid ourselves here) + a handful of smart, connected Wall St. guys with time on their hands...

What happens next?

Fri, 04/12/2013 - 09:34 | 3440368 kw2012
kw2012's picture

Who is the thumbsdown clown on these replies? Probably Bernanke himself.

Fri, 04/12/2013 - 10:33 | 3440678 SubjectivObject
SubjectivObject's picture

See that minus sign?

As presciently noted above, that's the proboscis of a mosquito.

It wants your number.

Fri, 04/12/2013 - 08:41 | 3440144 madcows
madcows's picture

I thought this was precisely the intent of QE and it's various other forms... I still believe this "Crisis" has been about insolvent banks, and not about liquidity.  Thus, the FED is shoring up its clients (banks) balance sheets... at the expense of the middle class.  fuckers.

Fri, 04/12/2013 - 08:43 | 3440154 LawsofPhysics
LawsofPhysics's picture

Correct.  Transferring all the risk from JPM to the government and U.S. Taxpayer.  Socialization of PRIVATE losses. Roll the motherfucking guillotines.

Fri, 04/12/2013 - 10:27 | 3440645 Dudeskis
Dudeskis's picture

If banks go down again I fully expect the guillotines to be rolled out on the corner of Liberty/ Nassau and the Washington Mall.

Fri, 04/12/2013 - 08:41 | 3440145 Lokking4AnEdge
Lokking4AnEdge's picture


The banks have no incentive to lend money or to even engage in consumer banking,,,see the constant decline in number of btanches..

When the Fed will stop he nonsense the banks will finally start to be banks.....

Fri, 04/12/2013 - 08:43 | 3440157 mckee
mckee's picture

C'mon... there's much more broken in the U.S. financial system than just that!

Fri, 04/12/2013 - 08:43 | 3440161 pods
pods's picture

Awesome, so JPM and probably most of the others are putting our money to work, for them.

They have reached critical mass and can now just sit back, sip Bollinger and watch the show.



Fri, 04/12/2013 - 08:50 | 3440174 RiverRoad
RiverRoad's picture

And that is precisely why "they" will never have to worry about long as they keep that money out of the sheeples' hands.  And as long as the sheeple have no jobs there will be no inflation either.  And tax havens....what would we do without them?  The faster money is printed the faster the 1% with their fingers in the till stuff it into tax havens.  Inflation?  What inflation?

Fri, 04/12/2013 - 08:57 | 3440213 Shizzmoney
Shizzmoney's picture


And as long as the sheeple have no jobs there will be no inflation either. 

On top of that, stock asset prices have risen 7% more, YOY, than during times of unemployment 5% and lower, during periods of high unemployment (like now) in this Age of NeoLiberalism (40 years). 

Fri, 04/12/2013 - 09:33 | 3440359 LawsofPhysics
LawsofPhysics's picture

"Infaltion" is irrelevant, it's a strawman.  Resource scarcity will trump any eCONomic bullshit, it alwasy does.  History is very clear on this.

Fri, 04/12/2013 - 13:49 | 3441869 DaveyJones
DaveyJones's picture

so true, so unabstract

Fri, 04/12/2013 - 08:49 | 3440175 dontgoforit
dontgoforit's picture

I wouldn't call $723 billion "no loans".  Down yeah, but x4 for the year is still nearly $3 trillion.  The QE explanation is certainly apt when looking at the S&P and DJIA, but not sure how it relates to whether someone actually 'needs' a loan or not.

Fri, 04/12/2013 - 08:51 | 3440182 Shizzmoney
Shizzmoney's picture

If this doesn't prove QE4EVA, nothing will. 

They will never stop printing.  They can't.  It's Tony Montana "empty the clip" time.

BTW if you have your money in a JPMorgan bank (this includes YOU, Jim Rickards) - you deserve to lose every single dime when this fail bank finally beaches on the shore of disgrace.

Fri, 04/12/2013 - 08:53 | 3440184 Dr. Engali
Dr. Engali's picture

What kills me is how many people/entities will accept this crap. How long are they going to allow the fed to inflate their buying power away while the Morgue is busy gambling with their deposits at the same time they use it to depress the price of precious metals? Eventually something must break and money has to flow someplace.

Fri, 04/12/2013 - 08:58 | 3440224 Bearwagon
Bearwagon's picture

The consumer's back is going to break, if it hasn't already. But these evil idiots will change nothing, at least not unless they see the dumb jones industrial average open with a 4000 points gap to the downside.

Fri, 04/12/2013 - 08:59 | 3440225 Shizzmoney
Shizzmoney's picture

What kills me is how many people/entities will accept this crap.

Two things those in liberty root for:

A) The Market crashes (which prob wont happen; they've printed enough paper to manipulate PMs, inflate asset prices, and paper over fraud.  the only hope you have is a sovereign bond crash, but I would prefer a straight market crash because I think governments will throw the people under the bus if the bonds crash/slide significantly).

B) Food prices drastically rising.  The number to trigger civil unrest is 35-40%.  30% even pissed off the people of Tunisia (but they don't have "Honey Boo Boo"). 

Fri, 04/12/2013 - 09:06 | 3440251 ekm
ekm's picture

Because if no QE, primary dealers would default on their CDS losses and Tripple Lehman will occur.

Politicians are affraid of it, but I think JPM wants a collapse so some other banks could be purchased at pennies on the dollar, like Bear Stearns.


Crude oil price forced their hand in 2008, it will do the same thing this time, but the fallout will be a lot larger.

Fri, 04/12/2013 - 09:23 | 3440315 fonzannoon
fonzannoon's picture

3 things ekm. Crude has dropped from $125 last year to $100 today.

Here are two wall street indicators to consider.

CNBC had the balls this morning to use the masters ticket prices as a proxy on how corporations feel so great about their balance sheets that they are willing to spend big to not hire people and expand operatons, but watch golf and get their shoes shined by hot chicks.

This probably will end in bank failures. But these guys will grab everything on their way out and torch the place, and be better off for it.


Fri, 04/12/2013 - 09:27 | 3440335 ekm
ekm's picture

You've fallen into the trap of the "REFERENCE POINT".

All media talks about y/y which is simply propaganda.


My reference point if year 2000. Oil was $30 or sth like that, hence oil has been in hyperinflation for 8+ years already.

The economy of the world has NOT increased by 4 times since 2000.


All those "high costs" are simply propaganda by oil companies and traders to justify the unjustifiable extremely sky high oil price.

Costs are not, I repeat, are not that high. Books are cooked on purpose.

Fri, 04/12/2013 - 09:31 | 3440354 fonzannoon
fonzannoon's picture

ekm you had mentioned a while back that it makes no difference if the dow goes to 30k. It's just the same pd's flipping the same stocks back and forth to each other. This seems to be the way it's going to go. They have pretty moch optically kept the consequences from being brought into the light. If a bank went belly up it would destroy all "faith" that was "restored" since the crisis. They won't risk that. They would rather keep doing QE and risk that we all sit here and bitch about it, but that's as far as it goes.

Fri, 04/12/2013 - 09:36 | 3440384 ekm
ekm's picture

They won't until..........crude oil price forces their hand...then.......boooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooom

Fri, 04/12/2013 - 09:34 | 3440371 Dr. Engali
Dr. Engali's picture

Exactly.... hyperinflation is not an event we will wake up to. It happens over time then starts to accelerate. Oil , like precious metals, have simply taken a pause on their climb upward...or should I say on the currency's downward spiral.

Fri, 04/12/2013 - 13:54 | 3441891 DaveyJones
DaveyJones's picture

there are different forces working on those two different things. ANything (fixed and limited) can be a currency. Not true for energy - which underlies every financial transaction

Fri, 04/12/2013 - 09:33 | 3440364 swmnguy
swmnguy's picture

Jesus Christ, Fonz.  Those two links really say it all, don't they.  I think "EKM" is right about crude oil; the fluctuations over the past year are just noise.  The real move is decade-long, and explains just about everything that has happened in Iraq, Libya, Sudan, etc.  American Lefties are too innumerate to understand how "Blood For Oil" was really going to work out.

But hot chicks shining shoes, and the guy who had this brainstorm is considering getting a liquor license?  He needs to figure out how to allow cigar smoking, too.

I shouldn't get too indignant.  20 years ago I realized we were creating a modern version of Feudalism, with corporate financial types as the aristrocracy, and the way for an enterprising yet poor boy to get ahead was to figure out how to cater to the new Borgiaa' insecurities.  My angle is a little more subtle than shoeshining chicks in tanks tops and short-shorts, though.

Fri, 04/12/2013 - 09:21 | 3440322 swmnguy
swmnguy's picture

Exactly right, EKM.  Now that all potential losses are on the Public tab, there's absolutely nothing but upside to JPM etc. from a crash.

Fri, 04/12/2013 - 08:58 | 3440223 Onohymagin
Onohymagin's picture

So the Banks are using their excusive supply of FED money to inflate the sharemarket?

Fri, 04/12/2013 - 09:04 | 3440248 traderjoe
traderjoe's picture

Just to clarify - banks most certainly create money when they make loans - see the Fed book Modern Monetary Mechanics. No air quotes needed. The banks might not be creating said money now, but they certainly can and do.

Fri, 04/12/2013 - 09:26 | 3440337 swmnguy
swmnguy's picture

Very true.  The anomalous thing right now, that shows what's really going on, is that now they don't have to create that money in order to be insanely profitable.  So they aren't.  There is risk to lending, and that risk needs to be covered by interest rates and fees, etc.  TPTB have decided we have to keep interest rates near 0% for a variety of reasons (force savers into Assets; allow the Fed to monetize all debt held by favored insiders, public or private; rig the bond market; etc.).  So there's no incentive to the banks to actually lend money.  Credit cards are worth it because they carry such high interest.  Student loans are worth it because they are backed by the Federal Government 100% and cannot be discharged.  No other forms of lending are really worth it to the big boys, because rates are so low as a matter of policy, and they can get all the money they want to play around with for free anyway.

As my grandmother used to say about something else, "Why would you buy the cow if you're already getting the milk for free?"

Fri, 04/12/2013 - 09:07 | 3440260 Riggers
Riggers's picture

I still can't believe these banks HAVE depositors. So many Americans are opposed to the bailouts, but yet they still park money with JPMorgan?

Fri, 04/12/2013 - 09:10 | 3440271 IamtheREALmario
IamtheREALmario's picture

First, the corrupt ones, including the politicians and beneficiaries of the banking crimes will always bank with the criminal banks. Second, there are a lot of ignorant people who barely have a clue what a bank is.

Fri, 04/12/2013 - 10:32 | 3440672 LawsofPhysics
LawsofPhysics's picture

The depositors are not "common folk", that's the point moron.

Fri, 04/12/2013 - 09:08 | 3440262 IamtheREALmario
IamtheREALmario's picture

Looks as if people and companies should not be putting their money in banks if they want things to change.

Fri, 04/12/2013 - 09:10 | 3440267 SmallerGovNow2
SmallerGovNow2's picture

I don't get it, i thought that these banks were leveraged out like 16 to 1 (loans outstanding to deposits on hand)?  what am i missing here?

Fri, 04/12/2013 - 09:13 | 3440280 IamtheREALmario
IamtheREALmario's picture

Wondering if deposits are not cash, but benficial interest in stock certificates held by the DTCC.

Oh, and deposits are unsecured, essentially interest free loans (liabilities) to the banks. The loans are the assets.

Fri, 04/12/2013 - 09:15 | 3440297 Tyler Durden
Tyler Durden's picture

Deposits are merely a form of funding. The leverage is how much equity buffer the banks have once they take the funding and use it to buy "stuff" - like S&P futures and AMZN stock. The point is that if and when the market tanks, the the 'assets' are crushed, there is virtually no real equity buffer to absorb losses and the bank has to begin impairing liabilities, such as deposits. This is precisely what happened in Cyprus.

Fri, 04/12/2013 - 09:21 | 3440325 SmallerGovNow2
SmallerGovNow2's picture

thanks for that.  so like holding a greek bond as an asset and having to take a 70% haircut?  then eventually liabilities exceed assets?

Fri, 04/12/2013 - 09:49 | 3440455 Pareto
Pareto's picture

I agree.  Same thing in Canada.  Everybody thinks the banks are safe and "all good".  But, after that EIA report you released last week showing "oil and gas consumption not seen since the 1970's", - reminding anyone with a pulse that price is a monetary phenomenon, not an aggregate demand phenomenon, suddenly, our bank's mortgage paper becomes toxic as hell.  I'm curious as to whether and how much of their book has ticked into the over 90 days category.  But, if we are indeed at quantity consumed levels not seen since the 1970's, then the price of oil, all else equal, should be around $45.  No wonder why Redford is crying for the Keystone and the Gateway pipelines.  Its not the oil sales she is after (since there wouldn't be any), rather, she is after the jobs.  It goes a long way to explaining why the Canadian banks have been shitting the bed for the last 3 or 4 weeks.

Fri, 04/12/2013 - 09:58 | 3440480 LawsofPhysics
LawsofPhysics's picture

Please tylers, there isn't enough real equity/assets/collateral on earth to even begin to cover the bank liabilities, especially if derivatives are included.

Fri, 04/12/2013 - 10:13 | 3440562 ekm
ekm's picture

Right on, riiiiiiiiiiiight on

Fri, 04/12/2013 - 13:57 | 3441909 DaveyJones
DaveyJones's picture

if derivatives are included, you can include the solar system

Fri, 04/12/2013 - 11:01 | 3440887 RichardENixon
RichardENixon's picture

True, but this bit of unpleasant reality was dealt with when the FASB was strong-armed into approving "Mark to Fantasy"

Fri, 04/12/2013 - 11:56 | 3441230 unununium
unununium's picture

They'll be safely out when and if the market tanks.  This is how you recapitalize a banking system these days and Ben sees no problem with it.

Fri, 04/12/2013 - 14:57 | 3442187 DR
DR's picture

How much of this increase in deposits is due to money being moved from uninsured MMFs to CDARS funding?


Is there a way to determine what amount of individual deposits of a bank have FDIC coverage? I bet when equity gets crushed that most deposit are still a no touch....

Fri, 04/12/2013 - 09:18 | 3440312 CaptainAmerica
CaptainAmerica's picture

One thing missing from the chart: obama's name

Fri, 04/12/2013 - 09:17 | 3440313 swmnguy
swmnguy's picture

What's amazing to me is that people simply accept that we don't have money for schools or bridges, we have to expect our pensions to collapse, we can't afford to do anything sensible about Health Care (and no I don't include ObamaCare as "something sensible about health care"); etc.

Yet we can afford $85 Billion a month to prop up the Finance industry by way of the bond market?  Obama wants to take $180 Billion over the next 10 years directly away from old-age pensioners on Social Security because we have to in order to be "fiscally responsible," we've all got to sacrifice and we have no other choice?  $180 Billion, which is 2 months worth of the Bankster's allowance?

I tell you what, if I gambled away a hundred times more money than I had, and then coerced my co-opted politicians to give me all the money I needed to cover all my losses and still provide me with massive profits, I'm not sure what kind of "Shared Sacrifiice" that really is.  Not quite the same as keeping eighty year-olds losing money each month to (whitewashed) inflation, while the medical care they need bankrupts them faster every month, but we say that's OK because if they can't afford beef they'll buy Friskies so it's really all the same.

This shit is sick.

Fri, 04/12/2013 - 09:40 | 3440406 Agent 440
Agent 440's picture

Relax. The 80 year olds are sending you their medical bills.

Fri, 04/12/2013 - 10:10 | 3440528 Benjamin Glutton
Benjamin Glutton's picture



Are you saying you would not continue to bail out the deadbeat depositors?

Fri, 04/12/2013 - 14:12 | 3441931 DaveyJones
DaveyJones's picture

you didn't just gamble, you gambled illegally. You stole, you lied, you defrauded, you broke securities laws, forged signatures ....

then not only did you avoid jail, not only did you avoid restitution, you got your leaders to declare the criminal the crime victim, and the leaders made the crime victim pay the criminal the restitution they themselves deserve.

That's insane

And the sign of a collapsing system and a collapsing government. 

said it before, bankers are bankers - it's what they do. The elected are another thing. At least on paper. They are the bigger criminals in this tragic comedy. This could not have happened, not at this scale, without them. People will figure that out. I can't predict the rest.

Fri, 04/12/2013 - 09:27 | 3440340 Seasmoke
Seasmoke's picture

Is it stealing when the foolish sheep just hand it over to you ??

Fri, 04/12/2013 - 09:30 | 3440350 Bearwagon
Bearwagon's picture

No, that's called hypnosis.

Fri, 04/12/2013 - 09:28 | 3440345 pbr streetgang
pbr streetgang's picture

JPM needs to go , RICO the mofo's. They're screwing me , oh, but they're to big too jail.E Warren is the only one with any balls in congress. Does the gov have any surplus vasoline available? For i am a fly in the disapearing ointment

Fri, 04/12/2013 - 12:00 | 3441260 unununium
unununium's picture

I had a dream that when the big 3 showed up for their meeting at the white house yesterday, Holder de-cloaked from his deep-sleep cover, cuffed them all, and informed them that their banks were in receivership.

Then I woke up back here with you lot.



Fri, 04/12/2013 - 09:33 | 3440363 John Law Lives
John Law Lives's picture

It is amazing that Chairsatan can see charts like this one and then tell the public that MOAR QE is needed.  No wonder the guy's lip sometimes quivers when he speaks to Congress...


Fri, 04/12/2013 - 09:35 | 3440379 Son of Loki
Son of Loki's picture

Very good article.

Fri, 04/12/2013 - 09:37 | 3440389 Seasmoke
Seasmoke's picture

The banks know they can no longer lend money to public. The moral hazard box has been ripped wide open. Most people would have no problem never paying the motherfuckers back one penny.

Fri, 04/12/2013 - 09:38 | 3440393 Colonial Intent
Fri, 04/12/2013 - 09:39 | 3440399 yogibear
yogibear's picture

None of these games stop until the Federal Reserve and government face a currency crisis and faith is lost in the US dollar.

It's plain to see what their game is.

Their jaw-flap about cutting back QE. It won't happen. They will not and cannot stop buying US debt with printed money.

Fri, 04/12/2013 - 09:44 | 3440427 Kina
Kina's picture

I just took my morning Dimon and wiped my Bernanke


I just took my morning Dimon and wiped my Bernanke with two ply Krugman.

Fri, 04/12/2013 - 09:47 | 3440444 chinaboy
chinaboy's picture

Great post.

Without loans increment, JPM does not need loan provisions. They can post handsome profit all year round. The logic is: loan is bad, casino business is safe and sound.

And the Fed is giving their full approval with 0 interest expense.

Fri, 04/12/2013 - 09:59 | 3440485 Downtoolong
Downtoolong's picture

The mechanisms and source of these excess funds does get complicated. But, it all boils down to a few simple questions for me:

 If the banks already have more base money (excess reserves) than they need to service the Main Street economy with loans, then why does Ben keep printing more of it? If it isn’t about creating more money to stimulate the Main Street economy, than who is it really for?

Fri, 04/12/2013 - 10:00 | 3440490 buzzsaw99
buzzsaw99's picture

Thanks to interest paid on borrowed reserves it is BONUS TIME AGAIN!

Fri, 04/12/2013 - 10:01 | 3440501 Monkeyfister
Monkeyfister's picture

Now, compare the JPMC chart with this chart: , and you get a pretty damned solid answer to the question: "Why do most Americans want to hang every Bankster from the lampposts?"

Cynical fuckers.

Fri, 04/12/2013 - 10:11 | 3440538 buzzsaw99
buzzsaw99's picture

the fed gangsters like unemployment, it helps keep wage inflation to nil. Meanwhile their bonuses and stock options go to the m-o-o-n spells moon.

Fri, 04/12/2013 - 10:03 | 3440505 YHC-FTSE
YHC-FTSE's picture

Great. Give all the cash to the worst gamblers and crooks in the world, but everything is risk free because they have "insurance" on the punts. Is it just me, or is the whole financial/political world terminally stupid? I'm beginning to understand the guys praying for total collapse.

Fri, 04/12/2013 - 10:09 | 3440533 rsnoble
rsnoble's picture

Don't worry the timing of all of this is set to conclude AFTER gun confiscation. LOL.

BTW does anyone expect the market to close red on friday?

Fri, 04/12/2013 - 10:36 | 3440711 rsnoble
rsnoble's picture

Sorry I forgot the 'save the children' crowd was here.  Only the US kids though, never mind the tens of thousands dead of them in Iraq with a exxon oil flag stuck in their grave.

Fri, 04/12/2013 - 10:12 | 3440547 Downtoolong
Downtoolong's picture

JPM hasn't been a bank for over 50 years.

Good point. And Goldman never was and never has been, but, Ben granted them the status nonetheless along with exemptions from risk management practices that traditional banks must adhere to.


Fri, 04/12/2013 - 10:14 | 3440577 WTF_247
WTF_247's picture

I am not sure why someone has not started a large 100% reserve bank that actually pays depositors half the spread.

It would not be hard to gather 500B in assets, buy T bills, bonds and then just book the profits.  Since you are not making loans you need way, way less employees.

Instead of fractional reserve lending you use fractional reserve investing.  If you have 500B in deposits, you know that 80% of that will sit around - meaning its not going anywhere.   You do not need 500B liquid - You can invest that in 1,2,3,4,5 year paper.  Only perhaps 20% of it needs to be liquid in Tbills.  The only investments will be in govt debt.

You can then split the earnings 50/50 with depositors and still make huge profits for doing next to nothing.  Hold the bonds to maturity, laddering again as they come due.  Even earning 1% on 500B = 5B a year.  Split that with depositors (after overhead) and you likely have 1-2B a year in pure profits.  As rates move up so do your earnings.  You can make extra money through fees (like every other bank) but the cash is never at risk ever from bad loans and gambling and the bank would never, ever need a bailout.

Fri, 04/12/2013 - 10:17 | 3440601 The Abstraction...
The Abstraction of Justice's picture

Investing in T-Bills is like gambling in a Jewish Casino.

Fri, 04/12/2013 - 10:38 | 3440721 rsnoble
rsnoble's picture

One of the problems is only 1billion year in profits. LOL.  Not nearly enough greed with this plan.

Fri, 04/12/2013 - 10:30 | 3440663 Graph
Graph's picture

For a quarter of a Century that I’ve lived in US I was listening to a mantra that: “It is nobody’s business how somebody makes money, how much and what they use that money for”. If you ask that question you are “socialist” ,Communist” or “Marxist”, three most powerful words in western hemisphere to lead masses by the nose.

Hope that “mavericks-in-making” and “permanently-just-around-corner-to-become-millionaires” now see how it is a very important question to ask.

Fri, 04/12/2013 - 10:30 | 3440670 pragmatic hobo
pragmatic hobo's picture

where are the deposits coming from? It sure isn't from the bottom 99% is it?

Fri, 04/12/2013 - 10:32 | 3440683 MrBoompi
MrBoompi's picture

Would somebody please show this post to rcwhalen?

Fri, 04/12/2013 - 10:37 | 3440707 wagthetails
wagthetails's picture

Excellent news for the strenght of banks!....espeically since that now both Deposits and Loans are both considered assets!  Redo JPM tier 1 capital under today's confiscation rules....might be the strongest bank in America!

Fri, 04/12/2013 - 10:42 | 3440735 unununium
unununium's picture

Looking forward to the switch to log scale as derivative hole is added, and time to solvency is calculated.  Please give the answer in orders of infinity.

Fri, 04/12/2013 - 10:54 | 3440803 Sigep0612
Sigep0612's picture

Nope.  Look how JPM made money last quarter.  They decreased their provision for loan loss.  In other words, the Fed told them that their existing loan portfolio quality improved thus the anticipated losses were reduced.  If they make more loans, the provision increases and their profit diminishes.  So the point of why doesn't JPM make more loans: "Simple they don't need to"  is dead on.  Secondly, if JPM makes loans they leave themselves open to cirticism.  The Fed comes marching in and tells them to increase their provision because the new loans will not be seasoned, increase their FDIC premiums, increase CRA (loans to low income areas), etc.   Who wants that headache.  But...the day is coming that the Fed will back off QE and when that happens, interest rates increase, loan volume will increase, inflation will accelerate and Humpty Dumpty (USA) will have a great fall.  

Solution:  Bust up the BIGS !!!  


Fri, 04/12/2013 - 10:59 | 3440855 Boubou
Boubou's picture

I believe this, but I don't know what the outcome will be or when. With continual dire warnings for the last 5 years ( much longer of you include the now defunct 'peak oil'or the Rogers commodity explosion), you can stay on the sidelines forever.

In fact the only calamities which actually happened, were the ones largely unforeseen.

Of course I also support the view that "nobody knows nothing" ( Bogle) but we have to remain in denial on that one.

Fri, 04/12/2013 - 11:47 | 3441176 Winston Smith 2009
Winston Smith 2009's picture

"This is happening exclusively due to the Fed, which when banks do not "create" money from loans (as they obviously don't), has to step in with QE and create money on its own."

Precisely!  Here's a fantastic 9 minute video done by the same guy who did the fantastic "Money as Debt" documentary that explains this scam, tying it into the sovereign debt crisis.  Our current financial system is a system of leeches:

What the Heck is a Bailout?



Fri, 04/12/2013 - 11:57 | 3441244 optionsman
optionsman's picture

if excess deposits over loans not invested in debt, would it be close to excess reserves? if so, why doesn't JPM just keep the excess reserves on deposit with the Fed who pays them Interest on Excess Reserves (25bps i think)? what do they pay to the depositors? next to nothing. if they can collect 25bps from the Fed why even bother with the "investment" of the excess deposits over loans? is it because JPM needs moar profit to cover lower profits in their traditional profiot centers? if that's the case then JPM and similar financial institutions are really dying a slow death IMHO..........

Fri, 04/12/2013 - 12:01 | 3441267 Thisson
Thisson's picture

I notice that someone has gone through and downvoted every single comment in this thread.  So silly.

Fri, 04/12/2013 - 12:26 | 3441448 swisssammy
swisssammy's picture

Sorry but to get a relevant opinion you cannot look only at loans over deposit. you have to look as well at assets under managemen. Since the loans could be funding part of these assets. The analysis would have also to be a bit more precise as it is necessary to differentiate the diffrent types of loans and deposits. 

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